This Week's 5 Dumbest Stock Moves

Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. Let's take a look at five dumb financial events this week that may make your head spin.

1. You're fired! Can I hire you back?
Yahoo! (Nasdaq: YHOO  ) had an uninspiring quarter, but that alone doesn't make a company worthy of making the cut in this weekly list. Yahoo!'s bonehead move is announcing that it would lay off "at least" 10% of its workforce.

Layoffs are necessary at Yahoo!. Its bloated cost structure and lack of material top-line growth mandate for a leaner organization. However, Yahoo! has a way of eating its way through its workforce cutbacks like a dieter gaining back all of the lost weight and then some. You're not fat, Yahoo! You're just big-boned.

Let's go over Yahoo!'s head count over the past few quarters:

 

Yahoo!

 Employees

Q1 2007

11,700

Q2 2007

12,400

Q3 2007

13,600

Q4 2007

14,300

Q1 2008

13,800

Q2 2008

14,300

Q3 2008

15,200

In other words, a 10% reduction of Yahoo!-ligans puts the company essentially where it was six months ago when it completed an earlier round of layoffs. Perhaps it's just me, but maybe some job cuts in the HR department wouldn't be a terrible thing.

2. Worst. Guidance. Ever.
Amazon.com (Nasdaq: AMZN  ) is checking its list and fretting it twice. The leading online retailer is nervous about the upcoming holiday season. It is so unsure of how things will play out that it's providing a guidance range big enough to drive a truck though.

Net sales will grow between 6% and 23% during the current quarter over last year's holiday run. If that sounds "I-loathe-you-this-much" wide, operating income is expected to clock in as low as a 46% decline over last year's showing to as much as a 13% gain. That's not an outlook; that's a look out!

3. Gone in a flash
One of Wednesday's biggest losers was flash memory giant SanDisk (Nasdaq: SNDK  ) . The stock shed 32% of its value when South Korea's Samsung (OTC BB: SSNLF.PK) announced that it was withdrawing its offer to buy the company at $26 a share.

Samsung was shocked by the company's quarter-billion operating loss during its most recent quarter. The dumb move here? Well, SanDisk actually turned down Samsung last month. So let's get this straight: SanDisk knew that it was going to report a horrendous quarter, and it still refused Samsung's offer on the grounds that it didn't offer fair value for SanDisk?

4. Turning Netflix into Not-Flix
DVD-mailing rock star Netflix (Nasdaq: NFLX  ) rarely proves mortal twice in the same month, but that's exactly what happened with Monday's third-quarter report. The company lowered its guidance for the number of subscribers that it expects to watch over by year's end to 8.85 million from 9.15 million.

Shaving 100,000 members off its projection isn't fatal, but it makes this week's list because it comes just two weeks after the company had lowered its outlook by 300,000 members (at the midpoint).

Why didn't it just rip the Band-Aid off in one tug and slash its membership target two weeks ago? The answer, of course, is that Netflix didn't know things were going to continue to deteriorate. However, if two bad weeks is enough to revise an already lowered revision, how bad can things continue to get here? I've been a satisfied Netflix investor for six years, but I'm finally worried.

5. You shouldn't always eat your own cooking
Buyouts are typically a good thing. If a company has idle cash lying around and feels that its stock is depressed, repurchasing outstanding shares can be a good thing. When is it not a good thing? Well, as Tim Beyers points out in quoting from Oracle's (Nasdaq: ORCL  ) 8-K disclosure form: "Oracle intends to use the additional authorization to repurchase its shares from time to time to offset the dilution created by shares issued under Oracle's stock option and employee stock purchase plans and to repurchase shares opportunistically."

Buying back stock to offset the internal printing press? That's not cool.

Another time when buybacks bite back is when stocks continue to plunge after the repurchases. That's happening a lot these days, as you might imagine. TD AMERITRADE (Nasdaq: AMTD  ) posted a reasonably good quarter yesterday, but then came the update on its share buyback efforts. 

The discount broker has spent $400 million in repurchasing 23 million of the 32 million shares in its buyback plan. The rub? The average price of the purchase is $17.27. The stock closed yesterday at $11.58. It's hard to take a company's buyback actions as a sign of bottoming out when even the company misplaces the net.

Let's beat the Dumb Drum:

Netflix and Amazon.com are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz is a fan of dumb and smart business moves; investors can learn plenty from both. Hdoes not own shares in any of the stocks in this story, save for Netflix. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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